Global economy 2020 – February 2021

Post-pandemic world order
Education
Multilateralism

Ngozi Okonjo-Iweala Makes History As WTO’s First African And Female Leader
(NPR) Okonjo-Iweala takes over a beleaguered organization that is facing a slew of challenges that have hobbled the WTO in recent years, including how to best manage the increased friction between economic superpowers the United States and China.
Critics of the organization said it has failed to intervene over some of China’s most egregious economic offenses, which in turn has let the U.S. name its economic adversary a currency manipulator and impose or threaten billions of dollars in tariffs on goods from China.

10 February
The circular economy can save the planet –⁠ if we start innovating now
As we begin 2021, businesses face a complex matrix of challenges – from rising geo-economic tensions to the urgency of the climate crisis. With less than 10 years to achieve the United Nations Sustainable Development Goals (SDGs), the Decade to Deliver is underway, and leaders must act for impact now.
Transitioning to a holistic circular economic model is critical to reducing environmental degradation and prioritizing biodiversity and nature, while also delivering on future competitiveness. In a circular economy, waste is designed out, and products are instead looped back into the production system at end of use. Consequently, growth is decoupled from the consumption of scarce resources, and materials are kept within productive use for as long as possible.
The circular economy presents a unique market opportunity upwards of $4.5 trillion by 2030. Accelerating this transition relies on the uptake of innovative new business models and disruptive technological innovation. Alongside prioritization of new business models, which now account for roughly 30% of M&A investment according to Accenture analysis, adopting new digital, physical and biological technologies can drive new opportunities and deliver on organizations’ triple bottom line.

• 3 reasons why embracing the circular economy can be powerful for middle income countries
• Successful circular economy ‘trailblazers’ do these 5 things: Report
• One year ago we issued a call for solutions to the world’s biggest challenges. This is our progress so far

5 February
Kenneth Rogoff: The Perils of an Uneven Global Recovery
Heightened global economic risks mean that many poorer countries could take years to return to their pre-pandemic growth trajectories. And if higher inflation leads the US Federal Reserve to raise rates somewhat sooner than it currently plans, emerging markets will be hit particularly hard.
(Project Syndicate) Despite enormous policy support provided by governments and central banks, the economic risks remain profound, and not just to frontier economies facing imminent debt problems and low-income countries experiencing an alarming rise in poverty. With the coronavirus far from tamed, populism rife, global debt at record levels, and policy normalization likely to be uneven, the situation remains precarious.

3 February
South Korea Leads World in Innovation as U.S. Exits Top Ten
Singapore, Switzerland rank 2nd and 3rd on new Bloomberg Index; Seven of top 10 places go to European countries; China slips
The 2021 rankings reflect a world where the fight against Covid-19 has brought innovation to the fore –- from government efforts to contain the pandemic, to the digital infrastructure that’s allowed economies to work through it, and the race to develop vaccines that can end it.
There’s near-total agreement in South Korea that “R&D is essential to have a future,” said Lee Kyung-mook, a professor of business management at Seoul National University. “It’s sandwiched between more developed nations, which still outperform them in technology, and China that is catching up fast relying on lower labor costs.”
Second-placed Singapore, which has been allocating budget funds to help workers and companies transition to a digital economy, also scores high for manufacturing –- and its globally competitive universities put it top of the tertiary education gauge. Switzerland, a leader in financial and biological technology, ranks near the top in both of the index’s research categories.
As the two biggest economies, the U.S. and China account for much of the world’s innovation, and they’re also locked in a battle over key areas of policy like intellectual property rights. The gap between them has steadily declined over the lifetime of the index. This year, both saw their rankings decline.

26 January
New coronavirus variants pose major risk to the global economy, IMF warns
(CNN via CTV) The pandemic could slam the brakes on a global economic turnaround this year despite mass vaccination programs and unprecedented levels of stimulus, according to the International Monetary Fund.
The IMF expects the global economy to grow by 5.5% this year, it said on Tuesday, or 0.3 percentage points faster than its previous forecast in October. The upgrade reflects “expectations of a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies,” the group said. (The IMF estimates that the world economy shrank by 3.5% in 2020, its biggest peacetime contraction since the Great Depression.)
But it also warned that surging infections in late 2020, renewed lockdowns and logistical problems with vaccine distribution could hamstring growth. If new variants of the coronavirus also prove difficult to contain, global output this year would be 0.75% less than the IMF expects.

24 January
Global Economic Prospects 2021
(World Bank) Although global economic output is recovering from the collapse triggered by COVID-19, it will remain below pre-pandemic trends for a prolonged period. The pandemic has exacerbated the risks associated with a decade-long wave of global debt accumulation. It is also likely to steepen the long-expected slowdown in potential growth over the next decade. In his Foreword, World Bank Group President David Malpass notes that “Making the right investments now is vital both to support the recovery when it is urgently needed and foster resilience. Our response to the pandemic crisis today will shape our common future for years to come. We should seize the opportunity to lay the foundations for a durable, equitable, and sustainable global economy.”
HIGHLIGHTS from Chapter 3: Global Economy: Heading into a Decade of Disappointments?
Key Points
•The COVID-19 pandemic has caused major disruptions in the global economy. Uncertainty about the post-pandemic economic landscape and policies has discouraged investment and trade; education disruptions have slowed human capital accumulation.
•The pandemic is likely to steepen the projected slowdown in growth of global potential output—the level of output the global economy can sustain at full employment and capacity—over the next decade. If history is any guide, the global economy is heading for a decade of growth disappointments.
•A comprehensive policy effort is needed to reverse the damage of the pandemic and rekindle robust, sustainable, and equitable growth. In the context of weak fiscal positions and elevated debt, institutional reforms to spur growth are particularly important. In the past, the growth dividends from reform efforts were recognized by investors in upgrades to their long-term growth expectations.

19 January
Four Ways Biden Can Boost the Global Economy
Jayati Ghosh
The US is nowhere near as economically dominant as it was even a decade ago. Yet President-elect Joe Biden can take several relatively simple steps that would have far-reaching benefits for the US economy, the American people, and the rest of the world.
(Project Syndicate) The first is to drop all objections to a World Trade Organization proposal to waive temporarily certain intellectual-property obligations in response to COVID-19. The proposal – introduced by India and South Africa, and cosponsored by other developing countries – aims to remove barriers to timely access to affordable medical products related to the “prevention, containment, or treatment” of COVID-19.
Likewise, the Biden administration does not need congressional approval to allow the International Monetary Fund to provide a new allocation of Special Drawing Rights to all its member countries. … even an initial $500 billion worth of SDRs would provide short-term relief to a wide range of developing economies, especially those with heavy debt burdens.
A third priority for the Biden administration should be to cooperate with other countries to create an effective global system for taxing multinationals’ profits. …multinationals could no longer avoid taxes by artificially shifting reported profits to lower-tax jurisdictions.
… By recommitting to the Paris agreement, Biden will accelerate global progress on climate change and provide additional support to post-pandemic economic recovery. We can hope that his administration will quickly pluck the other low-hanging fruit as well.

2020

26 November
The Pandemic Depression: The Global Economy Will Never Be the Same
By Carmen Reinhart and Vincent Reinhart
(Foreign Affairs September/October 2020) Although dubbed a “global financial crisis,” the downturn that began in 2008 was largely a banking crisis in 11 advanced economies. Supported by double-digit growth in China, high commodity prices, and lean balance sheets, emerging markets proved quite resilient to the turmoil of the last global crisis. The current economic slowdown is different. The shared nature of this shock —the novel coronavirus does not respect national borders— has put a larger proportion of the global community in recession than at any other time since the Great Depression. As a result, the recovery will not be as robust or rapid as the downturn. And ultimately, the fiscal and monetary policies used to combat the contraction will mitigate, rather than eliminate, the economic losses, leaving an extended stretch of time before the global economy claws back to where it was at the start of 2020.
The pandemic has created a massive economic contraction that will be followed by a financial crisis in many parts of the globe, as nonperforming corporate loans accumulate alongside bankruptcies. Sovereign defaults in the developing world are also poised to spike. This crisis will follow a path similar to the one the last crisis took, except worse, commensurate with the scale and scope of the collapse in global economic activity. And the crisis will hit lower-income households and countries harder than their wealthier counterparts. Indeed, the World Bank estimates that as many as 60 million people globally will be pushed into extreme poverty as a result of the pandemic. The global economy can be expected to run differently as a result, as balance sheets in many countries slip deeper into the red and the once inexorable march of globalization grinds to a halt.

16 November
RCEP: A new trade agreement that will shape global economics and politics
Peter A. Petri and Michael Plummer
(Brookings) On November 15, 2020, 15 countries — members of the Association of Southeast Asian Nations (ASEAN) and five regional partners — signed the Regional Comprehensive Economic Partnership (RCEP), arguably the largest free trade agreement in history. RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which concluded in 2018 and is also dominated by East Asian members, are the only major multilateral free trade agreements signed in the Trump era.
India and the United States were to be members of RCEP and the CPTPP, respectively, but withdrew under the Modi and Trump governments. As the agreements are now configured, they forcefully stimulate intra-East Asian integration around China and Japan. This is partly the result of U.S. policies. The United States needs to rebalance its economic and security strategies to advance not only its economic interests, but also its security goals.
RCEP will connect about 30% of the world’s people and output and, in the right political context, will generate significant gains. According to computer simulations we
recently published, RCEP could add $209 billion annually to world incomes, and $500 billion to world trade by 2030.
We also estimate that RCEP and CPTPP together will offset global losses from the U.S.-China trade war, although not for China and the United States. The new agreements will make the economies of North and Southeast Asia more efficient, linking their strengths in technology, manufacturing, agriculture, and natural resources.
Transatlantic Trade: US and Europe – Week of November 9, 2020
(Lexology) Given the US election uncertainty, the World Trade Organization (WTO) postponed its meeting last week to approve its next Director-General (DG). The WTO is reportedly awaiting presumed President-Elect Biden’s support for one of the two DG candidates. While most of the WTO member states are backing Nigeria’s Ngozi Okonjo-Iweala for the top position, the Trump Administration expressed support for South Korea’s Yoo Myung-hee ahead of the US General Election.

7 September
African trio set out battlelines for decisive phase of WTO leadership fight
Candidates from Africa are divided over whether the role needs a political big hitter or an expert insider.
(Politico Eu) It is increasingly likely that it will fall to a new boss from Africa to revive the World Trade Organization just as it has never seemed so powerless.
The selection of a successor to Brazil’s Roberto Azevêdo is now turning toward the elimination stage, and there are three Africans among the eight candidates. POLITICO has spoken to each of them, and asked them why they are better suited than their rivals to rescue an organization that has ground to a standstill, under pressure from China’s state-led economic model and facing an onslaught from U.S. President Donald Trump.
Disunity threatens Africa’s shot at the world’s top trade job
Mexico’s Jesús Seade is a strong compromise nominee if Africa splits between three candidates.
There is a sense in Geneva that the WTO would benefit from having its first female boss, and that the organization needs a more political leader to guide it out of its current paralysis.

20 August
How to Set World Trade Straight
Bilateral pacts promote protectionism. The WTO needs to return to the vision of equal rules for all.
By Robert E. Lighthizer
(WSJ) There seems to be a growing international consensus for a “reset” of the World Trade Organization—and for good reason. The international trading system has devolved into one of wildly uneven tariffs, rules that apply to some countries but not others, and scores of so-called free-trade agreements that in many cases codify protectionism and undermine the core WTO principle of most-favored-nation treatment. At the same time, the WTO’s dispute-settlement system rewards litigation over negotiation and has attempted to create a jurisprudence often divorced from the text of the rules agreed to by the WTO’s member states. [Paywall]

29 July
WTO set to skip naming acting director-general after U.S. push caused deadlock
World Trade Organization members are likely to refrain from appointing an interim director-general to succeed Roberto Azevedo when he steps down at the end of August, two sources following the process said on Wednesday, after Washington’s insistence on a U.S. candidate caused a deadlock.
Under the new proposal, instead of appointing one of four deputies to serve as interim chief until Azevedo’s replacement is chosen later this year, those officials, from the United States, China, Germany and Nigeria, would keep their current responsibilities.
“The U.S. is insisting on an American, but China and Europe put the brakes on that,” said a former WTO official familiar with the current process.

24 June
IMF sharply downgrades outlook for global economy in face of COVID-19
The IMF predicts that the global economy will shrink 4.9 per cent this year, significantly worse than the three per cent drop it had estimated in its previous report in April. It would be the worst annual contraction since immediately after the Second World War.
The IMF issued its bleaker forecasts Wednesday in an update to the World Economic Outlook it released in April. The update is generally in line with other recent major forecasts. Earlier this month, for example, the World Bank projected that the global economy would shrink 5.2 per cent this year.
In recent years, the proportion of the world’s population living in extreme poverty — equivalent to less than $1.90 US a day — had fallen below 10 per cent from more than 35 per cent in 1990. But the IMF said the COVID-19 crisis threatens to reverse this progress. It forecast that more than 90 per cent of developing and emerging market economies will suffer declines in per-capita income growth this year.

16 June
IMF sees ‘profound uncertainty’ about global recovery
(Globe & Mail) The International Monetary Fund will likely forecast a worse contraction in the global economy than previously estimated for 2020 and sees “profound uncertainty” about the path of recovery, IMF chief economist Gita Gopinath said in a new blog. She also cited a striking divergence of financial markets from the real economy, which could portend greater volatility in financial markets and potentially sharp corrections.

10 June
COVID-19 to Plunge Global Economy into Worst Recession since World War II
(World Bank) The swift and massive shock of the coronavirus pandemic and shutdown measures to contain it have plunged the global economy into a severe contraction. According to World Bank forecasts, the global economy will shrink by 5.2% this year.[1] That would represent the deepest recession since the Second World War, with the largest fraction of economies experiencing declines in per capita output since 1870, the World Bank says in its June 2020 Global Economic Prospects.
Economic activity among advanced economies is anticipated to shrink 7% in 2020 as domestic demand and supply, trade, and finance have been severely disrupted. Emerging market and developing economies (EMDEs) are expected to shrink by 2.5% this year, their first contraction as a group in at least sixty years. Per capita incomes are expected to decline by 3.6%, which will tip millions of people into extreme poverty this year.
The blow is hitting hardest in countries where the pandemic has been the most severe and where there is heavy reliance on global trade, tourism, commodity exports, and external financing.
Under the baseline forecast—which assumes that the pandemic recedes sufficiently to allow the lifting of domestic mitigation measures by mid-year in advanced economies and a bit later in EMDEs, that adverse global spillovers ease during the second half of the year, and that dislocations in financial markets are not long-lasting — global growth is forecast to rebound to 4.2% in 2021, as advanced economies grow 3.9% and EMDEs bounce back by 4.6%. However, the outlook is highly uncertain and downside risks are predominant, including the possibility of a more protracted pandemic, financial upheaval, and retreat from global trade and supply linkages. A downside scenario could lead the global economy to shrink by as much as 8% this year, followed by a sluggish recovery in 2021 of just over 1%, with output in EMDEs contracting by almost 5% this year.
Global economy hit by deepest recession in 80 years despite massive stimulus measures
World Bank Blog by Justin-Damien Guénette
If the pandemic is contained sufficiently by mid-year in advanced economies and a bit later in EMDEs, we anticipate the global economy to rebound to 4.2% in 2021, with advanced economies growing by 3.9% and EMDEs by 4.6%. But the outlook remains highly uncertain as the downside risks are predominant, including a protracted pandemic, financial upheaval, and retreat from global trade and supply linkages. (10 June)

OECD Economic Outlook June 2020
The world economy on a tightrope
Amid high uncertainty, two scenarios are possible
The lockdown measures brought in by most governments have succeeded in slowing the spread of the virus and in reducing the death toll but they have also frozen business activity in many sectors, widened inequality, disrupted education and undermined confidence in the future.
As restrictions begin to be eased, the path to economic recovery remains highly uncertain and vulnerable to a second wave of infections.
With or without a second outbreak, the consequences will be severe and long-lasting.

3 June
Kenneth Rogoff: Deglobalization Will Hurt Growth Everywhere
(Project Syndicate) Even if the United States turns a blind eye to deglobalization’s effects on the rest of the world, it should remember that the current abundant demand for dollar assets depends heavily on the vast trade and financial system that some American politicians aim to shrink. If deglobalization goes too far, no country will be spared.

30 April
The 90% economy that lockdowns will leave behind
It will not just be smaller, it will feel strange
(The Economist) The “90% economy” thus created will be, by definition, smaller than that which came before. But its strangeness will be more than a matter of size. There will undoubtedly be relief, fellow feeling, and newly felt or expressed esteem for those who have worked to keep people safe. But there will also be residual fear, pervasive uncertainty, a lack of innovative fervour and deepened inequalities. The fraction of life that is missing will colour people’s experience and behaviour in ways that will not be offset by the happy fact that most of what matters is still available and ticking over. In a world where the office is open but the pub is not, qualitative differences in the way life feels will be at least as significant as the drop in output.
Is the global trading system unravelling before our eyes? Here is where things stand
It took decades to build the rules-based trading system. A few frantic days compounded historic strains on it
(CBC) The modern history of global trade is being written at warp speed, with a dizzying series of developments now testing the international trading system.
What the rules-based order looks like after this is anyone’s guess.
Credit a collision of conditions: a pandemic, a trade-skeptical U.S. president, simmering frustration with China, and a growing great-power rivalry.

22 April
Who wins and who loses when oil prices fall?
By Dharshini David Global trade correspondent
(BBC) The International Energy Agency previously warned that Ecuador, Nigeria and Iraq could be worst hit, with earnings falling by between 50% and 85% – and that was assuming oil prices of $30 a barrel. Now, it’s less than $20 a barrel.
All their economies were under pressure already, all are heavily dependent on oil.
Fuel accounts for 98.5% of Iraq’s export earnings (gems, precious metals, fruit and nuts make up most of the rest). The agency claims Iraq’s government will now face a $50bn spending shortfall for the year, even if it were to only pay its civil servants, rendering spending on areas like healthcare vulnerable at the worst possible time.
How much a country spends on producing oil also dictates its vulnerability. Saudi Arabia has one of the lowest bills for extracting oil – but its dependence on the commodity means it too could face a funding shortfall of over $100bn. It’s still recovering from the last major drop in oil prices in 2014. Attempts to push into areas such as tourism were insufficient to plug the gap. It needs the oil price to be around $85 a barrel to balance the books on government spending.
… But it’ll benefit oil’s biggest customer, China, which accounts for a fifth of imports and is reportedly stockpiling bargain-basement crude as it fires up its production lines again.
On the whole, as the oil price has dropped, the risk of deeper recessions for producers has grown. However, if sustained, the fall could help the recovery in other nations further down the road.
Pricing the benefits of cheap oil in a world of economic lockdowns
(Reuters) – The oil price collapse that took U.S. crude prices sub-zero for the first time in history may turn out to be a silver lining for the world economy, possibly offering a springboard for recovery when coronavirus lockdowns finally end.
Cheap oil lowers transport and manufacturing costs while putting money into consumers’ pockets for discretionary spending — essentially loosening financial conditions. Yet it can also be destructive, hitting stock markets and oil producers’ budgets while fanning deflation risk.
So which one is it this time?

20 April
A Global Crisis Like No Other Needs a Global Response Like No Other
(IMF blog) …we have strengthened our arsenal and taken exceptional measures in just these two months.
These actions include:

• Doubling the IMF’s emergency, rapid-disbursing capacity to meet expected demand of about $100 billion. 103 countries have approached us for emergency financing, and our Executive Board will have considered about half of these requests by the end of the month.
• Reforming our Catastrophe Containment and Relief Trust, to help 29 of our poorest and most vulnerable members—of which 23 are in Africa—through rapid debt-service relief, and we are working with donors to increase our debt-relief resources by $1.4 billion. Thanks to the generosity of the United Kingdom, Japan, Germany, the Netherlands, Singapore, and China, we are able to provide immediate relief to our poorest members.
• Aiming to triple our concessional funding via our Poverty Reduction and Growth Trust for the most vulnerable countries. We are seeking $17 billion in new loan resources and, in this respect, I am heartened by pledges from Japan, France, United Kingdom, Canada, and Australia promising commitments totaling $11.7 billion, taking us to about 70 percent of the resources needed towards this goal.
• Supporting a suspension of official bilateral debt repayments for the poorest countries through end 2020—a ground-breaking accord among G20 countries. This is worth about $12 billion to nations most in need. And calling for private sector creditors to participate on comparable terms—which could add a further $8 billion of relief.
• Establishing a new short-term liquidity line that can help countries strengthen economic stability and confidence.

This is the package of actions that the International Monetary and Financial Committee endorsed last week at our virtual Spring Meetings. It represents a powerful policy response. Above all, it enables the IMF to get immediate, “here and now” support to countries and people in desperate need. Today.

Who will be the winners in a post-pandemic economy?
(WEF) COVID-19 is putting the global economy into a tailspin. Many countries are heading for very sudden and unprecedented recession. This crisis will catalyze some huge changes. Few industries will avoid being either reformed, restructured or removed. Agility, scalability and automation will be the watchwords for this new era of business, and those that have these capabilities now will be the winners.
Thanks to government stimulus packages, liquidity is coming back to the market. It will keep enough of the economy afloat so that it can climb out of recession rapidly once the various lockdowns are lifted. But the way much of it is structured means that it will likely benefit already better capitalized larger businesses, over the smaller operators who may struggle.
It would be an over-simplification, however, to paint this new era as one of “big” versus “small”, or “incumbents” versus “upstarts”. The past decade’s tropes that pitted fintechs and digital natives against big banks and consumer brands will seem dated by the middle of this year.
Indeed, one could see the current times as the first real test of the digital-first business mantras that have been extolled over the first part of this century. COVID-19 will force a rebirth of many industries as we all sit at home in lockdown, re-assessing and re-imagining modes of consumption, supply, interaction and productivity. As president of a global technology firm, what intrigues me is where there will be paradigm shifts, as opposed to just existing trends either accelerating or decelerating.

18 April
The IMF says its forecast for the COVID-19 recession might now be too optimistic
The IMF sees GDP per capita shrinking across 170 nations due to the coronavirus pandemic, but the projection “may actually be a more optimistic picture than reality produces.”
The IMF noted that even a short-lived outbreak would drag the world into a 3% GDP contraction.
A resurgence of COVID-19 in 2021 could leave economies struggling for years to come.
The International Monetary Fund recently announced the “Great Lockdown” recession will drag global GDP lower by 3% in 2020, but its managing director now thinks the gloomy outlook could be too positive.
The coronavirus pandemic is set to leave 170 countries with lower GDP per capita by the end of the year, but the projection “may be actually a more optimistic picture than reality produces,” Kristalina Georgieva told the BBC in an interview.

17 April
Saudi Arabia’s decision to trigger an oil price war has backfired badly
(Globe & Mail) Saudi Arabia’s Crown Prince Mohammed bin Salman is learning the hard way that barrels of oil with nowhere to go are worth approximately zero. Saudi barrels aren’t worth nothing – yet – but they’re getting close.
On Tuesday, the day after U.S. oil prices actually went negative, Brent crude, the international benchmark, fell 25 per cent to US$19 a barrel. A year ago, it was trading at US$70.

14 April
The world economy in 2020—the IMF gets it mostly right
(Brookings) Encouragingly, IMF economists seem to have learned from their mistakes. This time, they project a quick but conditional rebound: “In a baseline scenario—which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound—the global economy is projected to grow by 5.8 percent in 2021 as economic activity normalizes, helped by policy support.” Coincidently, the U.S. economy is expected to grow by about the same rate. The IMF’s economists are likely to be more accurate this time though they may be exaggerating the 2020 contraction.

24 March
Oil-price war seen exacerbating slump in global economy
There are few upsides to $25 oil during a pandemic.
Previously when oil prices have slumped by 50% or more, in 1986, 2008-09 and 2015-16, GDP growth was given a boost as lower energy prices allowed households more discretionary spending. With a barrel of Brent crude down by more than 60%, consumers would have see quite a windfall, in normal times.
Capital Economics calculated that a sustained drop in the price of oil to $35/barrel will lower OECD inflation by about 1 percentage point. But with the economic consequences of coronavirus expected to include a substantial reduction in consumer demand, lower oil prices will likely hinder rather than help the world economy.

17 April
It’s the End of the World Economy as We Know It
Experts suggest there will be “a rethink of how much any country wants to be reliant on any other country.”
By Neil Irwin
(NYT) The world economy is an infinitely complicated web of interconnections. We each have a series of direct economic relationships we can see: the stores we buy from, the employer that pays our salary, the bank that makes us a home loan. But once you get two or three levels out, it’s really impossible to know with any confidence how those connections work.
And that, in turn, shows what is unnerving about the economic calamity accompanying the spread of the novel coronavirus.
In the years ahead, we will learn what happens when that web is torn apart, when millions of those links are destroyed all at once. And it opens the possibility of a global economy completely different from the one that has prevailed in recent decades.
“There will be a rethink of how much any country wants to be reliant on any other country,” said Elizabeth Economy, a senior fellow at the Council on Foreign Relations. “I don’t think fundamentally this is the end of globalization. But this does accelerate the type of thinking that has been going on in the Trump administration, that there are critical technologies, critical resources, reserve manufacturing capacity that we want here in the U.S. in case of crisis.”
Consider just a few pieces of evidence for the weakening underpinnings of globalization.
France’s finance minister directed French companies to re-evaluate their supply chains to become less dependent on China and other Asian nations. U.S. Customs and Border Protection has said it will seize exports of certain medical supplies. And on Friday, Senator Lindsey Graham suggested that the United States should punish China for failing to contain the virus by canceling debt the Chinese government owns — a step that would risk the role of U.S. Treasury bonds as the bedrock of the world financial system…. Susan Lund, a partner at McKinsey who studies global interconnectedness, … envisions not so much a full-scale retreat from global trade as a shift toward regional trade blocs and greater emphasis on having companies build redundancy into their supply networks. Governments will probably insist that certain goods, like pharmaceuticals and medical equipment, rely more on domestic production given the current global scramble for those items.
Bloomberg: … Japan is paying its companies to bring home their factories from China and American politicians are having similar thoughts. Multinationals are rethinking their global supply chains: The U.S.-China trade war showed how the benefit of being in China can be outweighed by the political risk. Researchers at the consulting firm Kearney say corporate executives in the West are increasingly focused on resilience—the ability to foresee and adapt to unforeseen systemic shocks. That will mean diversifying production away from China to other parts of Asia, near-shoring to adjacent countries with lower costs, or simply bringing industries such as auto parts manufacturing home after investing in technologies such as 3D printing.
At the Bloomberg New Economy, we’ve always recognized that the center of gravity of the global economy is shifting east. Notwithstanding China’s dimmed economic prospects in the near-term, the coronavirus appears to be accelerating that broader trend. By and large, Asian economies have responded far better to the pathgen’s threat than those in Europe and America. South Korea, Taiwan and Singapore have been standouts. Public trust in government in those nations is high; societies have held together. China, too, has outperformed after early cover-ups.

15 April
The deadly link between COVID-19 and air pollution
(WEF) As the coronavirus pandemic impacts millions across the world and brings economies to a grinding halt, there is a lot of talk about how emissions from fossil fuel combustion have dropped radically in many countries. Yet this is no solution to air pollution and climate change. For while eerily empty cities may be bathed in blue skies, millions are suddenly out of work and wondering how they are going to care for their families.
The poor and most vulnerable will suffer most from both the health impacts and the economic crisis. Cleaner air for a few months may be a tiny silver lining to COVID-19’s dark clouds, but will do little in the long run to solve the problem of outdoor air pollution that kills more than four million people every year. For that we need to kick our habit of burning coal, oil and gas. …  On every continent, people suffer the negative health impacts of air pollution. Living in Delhi is comparable to smoking six cigarettes a day. The respiratory systems of people in California and Australia have been compromised by air pollution from climate-fuelled forest fires. The people of Wuhan have suffered poor air quality for years, and just last summer took part in air pollution protests.  …
As world leaders respond to the coronavirus, they have a chance to chart a different course and make a major intervention for a healthy planet and healthy people. With trillions of dollars in economic stimulus investments in the offing, they have a golden opportunity to channel significant portions of those funds to fast forward to a renewable energy economy. A transition to clean, renewable energy and transport will seriously reduce air pollution, greenhouse gas emissions and the impact of future pandemics.
The coronavirus pandemic has made it clearer than ever that human and planetary health are intimately interconnected. The choice is ours to act accordingly.

7 April
Forbes Publishes 34th Annual List Of Global Billionaires
Amid the COVID-19 outbreak, some of the world’s wealthiest are serving as agents of change and taking action to reinvent their businesses to aid in the global response to the coronavirus outbreak. Billionaires like tech tycoon Bill Gates; Eric Yuan, CEO of Zoom; Bernard Arnault, CEO of LVMH, Brian Chesky, CEO of Airbnb; Dallas Mavericks owner Mark Cuban and a host of others are using their financial resources to help combat the health crisis and boost the economy. The Forbes wealth team is closely monitoring what billionaires are doing in response to the pandemic with a Billionaire Tracker: Actions The World’s Wealthiest Are Taking In Response To The Coronavirus Pandemic.
“The world’s richest are not immune to the devastating impact of the coronavirus,” said Kerry A. Dolan, Assistant Managing Editor of Wealth, Forbes. “The drop in the number of billionaires this year reflects the economic impact the pandemic is already having.”

6 April
FT: “Global economy set for sharpest reversal since Great Depression,” by Chris Giles in London: “The coronavirus pandemic and lockdowns imposed by governments on both sides of the Atlantic have pushed the global economy into the sharpest downturn since the Great Depression, data released on Friday signalled. …
“The head of the IMF has warned that the economic impact of the coronavirus pandemic would be worse than the 2008 financial crisis. ‘This is a crisis like no other,’ said Kristalina Georgieva, managing director of the IMF, speaking at a conference organised by the World Health Organization on Friday. ‘Never in the history of the IMF have we witnessed the world economy coming to a standstill,’ she said. ‘It is way worse than the global financial crisis.'”

4 April
High-frequency traders are winning big thanks to coronavirus disruption
(Quartz) The coronavirus pandemic is disrupting the global economy and taking a major toll on financial companies, from insurers to banks and asset managers. High-frequency trading companies are among the very few to benefit from the pandemonium in financial markets.
Virtu Financial, a New York-based trading firm, has risen about 42% in the stock market this year, while Amsterdam’s Flow Traders, another market maker, has climbed 38%. Meanwhile BlackRock, the world’s biggest asset manager, hasn’t been immune to the fallout, and banks like JPMorgan have fallen 30% or more.
The threat to financial companies from the pandemic disruption is widespread. Banks are vulnerable to defaults as companies are forced to shut down to contain the breakout and as the number of unemployed people grows rapidly. Consumers are spending and traveling much less, interrupting revenue for payment companies like Visa. (Though auto insurers are doing well as drivers stay home.)

2 April
The Oil Collapse
A Pandemic and a Price War Have Together Brought Energy Markets to a Crisis
By Daniel Yergin
(Foreign Affairs) A price war, with producing nations battling for market share, has become lodged in the larger crisis of the novel coronavirus pandemic and what will likely be the worst recession since World War II. The resulting collapse in demand will be bigger than any recorded since oil became a global commodity. Oil prices are already down two-thirds since the beginning of 2020 and still falling. The decline in global consumption in April alone will be seven times bigger than the biggest quarterly decline following the 2008–9 financial crisis. In areas that lack access to storage and markets, the price of a barrel of oil could fall to zero.
This crash will create turmoil for oil-exporting countries and add to the turbulence of financial markets. It will also add another layer of complexity to an already fraught geopolitical situation—including by pulling the United States into contentious international wrangling over what can be done to ameliorate the crash. In February of this year, U.S. oil production reached its highest level ever, 13.1 million barrels a day—considerably more than either of the other top global producers, Saudi Arabia and Russia. That record followed a decade in which, owing to the shale revolution enabled by new fracking techniques, the United States went from being the world’s largest importer of oil to a major exporter.

26-28 March
IMF declares global recession and doubles the size if its financial war chest
(Euro News) The IMF Managing Director gave her verdict after a meeting on Friday of its Financial Committee that represents 189 countries. That meeting followed another the day before with G20 leaders.
“We do project recovery in 2021,” Kristalina Georgieva said. “In fact, there may be a sizeable rebound, but only if we succeed with containing the virus everywhere and prevent liquidity problems from becoming a solvency issue.”
Although essential goods and services are still operating economic activity has basically fallen off a cliff.
The number of requests by countries seeking help from the IMF has been rising rapidly. Fifty low-income and 31 middle-income countries have approached the Fund for emergency financing so far.
G20 leaders to inject $5 trillion into global economy in fight against coronavirus
(Reuters) – Leaders of the Group of 20 major economies pledged on Thursday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus and “do whatever it takes to overcome the pandemic.”
Showing more unity than at any time since the G20 was created during the 2008-2009 financial crisis, the leaders said they committed during a videoconference summit to implement and fund all necessary health measures needed to stop the virus’ spread.
“The G20 is committed to do whatever it takes to overcome the pandemic,” along with the World Health Organization and other international institutions, they said.
Their statement contained the most conciliatory G20 language on trade in years, pledging to ensure the flow of vital medical supplies and other goods across borders and to resolve supply chain disruptions.
But it stopped well short of calling for an end to export bans that many countries have enacted on medical supplies, with the G20 leaders saying their responses should be coordinated to avoid “unnecessary interference.”
‘World Leaders Seem in Denial’: Demands for Radical Global Action on Coronavirus as Virtual G20 Summit Ends With Vague Promises
(Common Dreams) Leaders of the world’s largest economies expressed confidence after a virtual G20 summit Thursday that they “will overcome” the global coronavirus pandemic, but critics said optimistic statements and vague promises will do nothing to stem the disease outbreak in the absence of immediate, coordinated, and sweeping action.
In a joint statement (pdf) following the summit, G20 leaders said they are committed to “presenting a united front against this common threat,” even as leaders of member nations like U.S. President Donald Trump and Brazilian President Jair Bolsonaro continue to downplay the deadly virus pandemic and urge their citizens to return to work against the advice of public health experts.
Just after the event concluded, Johns Hopkins University announced that there are now more than half a million confirmed coronavirus cases worldwide.

16 March
The COVID-19 Debt Deluge
Jayati Ghosh
How long the COVID-19 crisis will last, and what its immediate economic costs will be, is anyone’s guess. But even if the pandemic’s economic impact is contained, it may have already set the stage for a debt meltdown long in the making, starting in many of the Asian emerging and developing economies on the front lines of the outbreak.
(Project Syndicate) [T]he COVID-19 crisis could have many severe economic effects, possibly pushing the global economy into recession. Supply chains are being disrupted, factories are being closed, entire regions are being locked down, and a growing number of workers are struggling to secure their livelihoods. These developments will all lead to mounting economic losses. A world economy already suffering from insufficient demand – owing to rising wealth and income inequality – is now vulnerable to a massive supply-side shock.Another potential consequence of the pandemic is less recognized but potentially more important: increased financial fragility, implying the potential for a debt crisis and even a broader financial collapse. After COVID-19 is contained and policies are implemented to ease the situation, supply chains will be restored and people will return to work with the hopes of recovering at least some of their lost incomes. But that real economic recovery could be derailed by unresolved financial and debt crises.
Today’s financial fragility far predates the COVID-19 “black swan.” Given the massive accumulation of debt in both developed and developing countries since the 2008 financial crisis, it has long been clear that even a minor event – some “known unknown” – could have far-reaching destabilizing effects. Yet, until recently, rising asset prices – owing to a long period of extraordinarily loose monetary policies in advanced economies – disguised mounting debt levels. As the recent scare in global equity markets indicates, asset bubbles cannot last forever. By contrast, in the absence of active public pressure or state intervention to facilitate their resolution, debts do not deflate on their own.A recent analysis by the United Nations Conference on Trade and Development shows how sustained debts could pose a larger problem for the global economy and financial system.

13 March
Trump’s Global Recession
By Anders Aslund
As long as US President Donald Trump remains in office, it is difficult to envisage any credible international effort to resolve the financial crisis caused by the COVID-19 pandemic. As a result, there is now every reason to expect a long and severe global recession.
(Project Syndicate) The dearth of international clout extends beyond the US. The leaders of the European Union, the European Central Bank, and the International Monetary Fund are all new in their jobs. German Chancellor Angela Merkel is a politically weakened lame-duck leader, French President Emmanuel Macron’s international standing has slipped, and the United Kingdom’s prime minister, Boris Johnson, is preoccupied with Brexit.
Needless to say, the COVID-19 pandemic is the greatest challenge facing the global economy since 2008. And, so far, world leaders have shown that, this time, they are not up to the task of meeting it. Unless that changes very quickly, there is every reason to expect a long and severe global recession, with profound implications for developed and developing countries alike.
The Economist: All governments will struggle to cope with the spread of covid-19, which was officially declared a pandemic this week by the World Health Organisation. Some will struggle more than others. Our cover leader argues that how well countries will fare depends on three factors. One is their attitude to uncertainty: China, having imposed a brutal quarantine, is already claiming victory, perhaps prematurely; democracies are watching to see whether Italy’s largely self-policed lockdown slows the disease’s advance. Second, universal health systems, such as Britain’s, should find it easier to mobilise resources than fragmented, private ones, such as America’s, that have to worry about who pays what. Third is trust: Iran’s government is widely suspected of covering up deaths and cases. We also examine the anatomy of the virus that causes covid-19 and how it hijacks the cells of those infected. And on our Graphic Detail page we track, using mobile-phone data, how foot traffic has fallen in affected cities. Rome’s central station was 69% less busy than normal at 9am on March 6th—before the official lockdown.

9 March
The world economy essentially just got a one-two punch to the face. The coronavirus is a serious health crisis that’s morphing into an economic crisis as people stay home, cancel trips and stop spending on about everything except hand sanitizer and toilet paper. On top of that, Saudi Arabia basically launched an oil price war on Sunday. The world has a glut of oil right now and the Saudis decided not to scale back production after Russia flooded the market with extra oil. So oil prices plunged 30 percent Sunday, the largest one-time drop since the 1991 Gulf War. Oil is now trading around $30 a barrel, a price most energy companies outside Saudi Arabia can’t survive on, including many in the United States.Coronavirus Is Imploding Global Financial Markets
Several news organizations have been running a quote from Vital Knowledge founder Adam Crisafulli, who said Sunday that the oil-price crash “has become a bigger problem for markets than the coronavirus,” but this claim does not make a lot of sense to me. First of all, the oil-price crash is the coronavirus: It is a knock-on effect from the sharp drop in consumer demand for oil due to virus-related disruptions. Second, from a U.S. perspective, the effect of cratering oil prices is decidedly mixed: It’s bad for firms in the oil industry and for regions where oil extraction is a major industry (Exxon was down 14 percent just after the open Monday), but it’s good for businesses and consumers that rely on petroleum products, which will get cheaper.

28 February
Solidarity Now
Joseph E. Stiglitz
After decades of shaping global and national economic policies according to the dictates of neoliberal ideology, public sectors are starved, climate change is accelerating, inequality is on the rise, and democracies are confronting near-unprecedented crises. The only way forward is to leave behind the defunct economic nostrums of the past.
(Project Syndicate) The capitalist system itself is undergoing yet another existential crisis, and many countries are facing various trials of their own. The United States is in the grips of an opioid crisis, a childhood diabetes crisis, and a political crisis. China, already struggling to maintain growth in the context of a broader trade and technology war with US President Donald Trump’s administration, is beset by a coronavirus epidemic that threatens to become a pandemic. Argentina is confronting another debt crisis, and mass demonstrations are roiling countries worldwide.
Looming in the background is a deeper ethical crisis that is evident pretty much everywhere. Business leaders, myopically focused on the bottom line, have displayed remarkable moral turpitude. The financial sector has been marked by predatory lending, market manipulation, and abusive consumer-credit practices. Automakers have been caught gaming environmental regulations. The food and beverage industry is knowingly contributing to childhood obesity around the world. Pharmaceutical companies are pushing addictive drugs even as they claim otherwise (while eschewing research into desperately needed new antibiotics).
Or consider Facebook, one of the world’s largest communication and media companies. Last year, the company’s leaders made no apologies for knowingly permitting targeted disinformation campaigns and acts of political subterfuge on their platform, regardless of the consequences for democracy. The company now epitomizes the dangers of a privately controlled monopolistic surveillance economy.
… Over the past few years, I have been developing a vision of “progressive capitalism” that aspires to strike a better balance between markets and other institutions. Needless to say, this would represent a significant departure from the unfettered, lightly regulated system we have now. Progressive capitalism recognizes that for most firms, the easiest way to maximize profits is to amass market power, crush competitors, block would-be challengers, exploit others’ vulnerabilities, and secure rents, including through undue political influence. As we have seen repeatedly in recent decades – from Enron to Purdue Pharma to Volkswagen – contributing to society tends to come last. That is why we need regulation. The Ten Commandments were a simple set of regulations for a relatively simple society. Today, we need complex regulations for a highly complex modern global economy.

20 February
Coronavirus poses risks to fragile recovery in global economy: IMF
(Reuters) – The coronavirus epidemic has already disrupted economic growth in China and a further spread to other countries could derail a “highly fragile” projected recovery in the global economy in 2020, the International Monetary Fund warned on Wednesday.
In a note for G20 finance ministers and central bankers, the global lender mapped out many risks facing the global economy, including the disease and a renewed spike in U.S.-China trade tensions, as well as climate-related disasters.
IMF Managing Director Kristalina Georgieva said the outbreak was a stark reminder of how unforeseen events could threaten a fragile recovery, and urged G20 policymakers to work to reduce other uncertainties linked to trade, climate change and inequality.
Global implications of a US-led currency war
In 2019, President Trump called on the U.S. Federal Reserve to cut interest rates to depreciate the U.S. dollar, which, according to the IMF, is overvalued by between 6 and 12 percent. …
Such a policy would likely result in a larger U.S. trade deficit, would only temporarily devalue the real effective exchange rate and would only temporarily support the U.S. economy. The policy would boost the trade balances of most U.S. trading partners, depreciate China’s exchange rate and boost China’s GDP. Given the policy would make the overvalued exchange rates of many economies even more overvalued, the paper explores what would happen if U.S. trading partners were to retaliate by devaluing their currencies. It shows that this makes it harder for the U.S. to achieve its objectives and forces a more severe adjustment for economies that presently have undervalued exchange rates. Download paper

19 February
Finding Solid Footing for the Global Economy
(IMF blog) As the Group of Twenty industrialized and emerging market economies (G-20) finance ministers and central bank governors gather in Riyadh this week, they face an uncertain economic landscape.

17 February
Nouriel Rubini: The White Swans of 2020
Financial markets remain blissfully in denial of the many predictable global crises that could come to a head this year, particularly in the months before the US presidential election. In addition to the increasingly obvious risks associated with climate change, at least four countries want to destabilize the US from within.
Beyond the usual economic and policy risks that most financial analysts worry about, a number of potentially seismic white swans are visible on the horizon this year. Any of them could trigger severe economic, financial, political, and geopolitical disturbances unlike anything since the 2008 crisis.
…open aggression is not really an option at this point, given the asymmetry of conventional power. China’s immediate response to US containment efforts will likely take the form of cyberwarfare. There are several obvious targets. Chinese hackers (and their Russian, North Korean, and Iranian counterparts) could interfere in the US election by flooding Americans with misinformation and deep fakes. With the US electorate already so polarized, it is not difficult to imagine armed partisans taking to the streets to challenge the results, leading to serious violence and chaos.Revisionist powers could also attack the US and Western financial systems – including the Society for Worldwide Interbank Financial Telecommunication (SWIFT) platform. Already, European Central Bank President Christine Lagarde has warned that a cyberattack on European financial markets could cost $645 billion. And security officials have expressed similar concerns about the US, where an even wider range of telecommunication infrastructure is potentially vulnerable.

15 February
The new coronavirus could have a lasting impact on global supply chains
Multinationals have failed to take seriously the risk of disruption
(The Economist) [C]onsider Apple. Such is the American tech titan’s reliance on the Chinese mainland for parts and assembly that United Airlines typically shuttles some 50 of its executives between California and China each day. But not at the moment. United and other carriers have suspended flights to and from China. A lack of workers meant that after the end of the lunar new-year holiday Foxconn, which makes most of Apple’s iPhones in China, could not get its assembly plants back to full capacity this week. Analysts reckon that the virus could lead to Apple shipping 5-10% fewer iPhones this quarter and could scupper its plans to ramp up production of its popular AirPods.
As covid-19 spreads, its effect on business is amplified. … The Singapore Air Show earned the city-state some $250m in 2018, but far less this week owing to cancellations by 70 companies including Lockheed Martin. The Mobile World Congress, a giant telecoms conference due to take place in Barcelona this month, has been cancelled after companies from Vodafone and BT to Facebook and Amazon pulled out. It is increasingly clear that the virus could damage global supply chains, costing the world’s economy dearly. …the bosses of [multinationals] have done little to prepare for shocks such as that inflicted by the outbreak of the new coronavirus. …big multinationals have left themselves dangerously exposed to supply-chain risk owing to strategies designed to bring down their costs. …giant firms are much more reliant on Chinese factories today than they were at the time of the SARS outbreak in 2003. China now accounts for 16% of global GDP, up from 4% back then. Its share of all exports in textiles and apparel is now 40% of the global total.
Mainland suppliers no longer simply assemble products; they make many of the parts that go into them as well.
…the regions worst affected by covid-19 and the subsequent government lockdowns are particularly important to several global industries. The electronics industry is most at risk, according to Llamasoft, a supply-chain analytics firm, because of its relatively thin inventories and its lack of alternative sources for parts.

4 February
Africa Is the Last Frontier for Global Growth
If Africa sustains and accelerates structural reforms over the next half-century, some believe that the continent can emulate China’s rapid rise of the last 50 years. But success is far from guaranteed, even as the consequences of failure would be grave – and global.
Africa today accounts for around 17% of the world’s population, but only about 3% of global GDP. These statistics not only attest to a failure to tap the continent’s developmental potential, but also highlight the tremendous opportunities and risks ahead. As long as Africa continues to lag economically, it will be a source of global instability and extremism. But if it rises, it could be one of the major sources of growth for the world.